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Hostess Going Out Of Business – CEO Blames Union for Collapse [POLL]

Hostess Brands killed by union strike
(Photo by Scott Olson/Getty Images)

As one critic put it, sometimes workers bite the hand that feeds them, but rarely do they “eat it.”Hostess Brands Inc, already financially troubled since late last year, abruptly pulled the plug Thursday with CEO Gregory F. Rayburn announcing a petition to allow it to close the business. The second-largest union that supplies workers for the company rejected a September agreement that included a pay and benefit cut in exchange for the company staying open.

The company had been facing increasing competition from other snack manufacturers such as Little Debbie. With many people reportedly eating healthier, the company had already been through a bankruptcy reorganization.

Some union workers crossed picket lines to work despite being warned they would be fined by the union for doing so. Rayburn, who joined Hostess as a reorganization expert charged with “righting the ship” said those workers were not enough to enable them to return to production.

Hostess had warned the union — The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union –  it would start dismantling the company if production did not return to regular operations by Thursday, Nov. 15.

From the NBC Dallas/Forth Worth Website:

“In announcing its decision, Hostess said its wind down would mean the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores in the United States.”

Some 18,500 workers will now be out of a job. Hostess was founded in 1930. Assuming the bankruptcy goes as planned, it will end a 90-plus-year history as the most famous, and one of the most popular, snack companies in history. According to the NBC Dallas/Forth Worth story, the cuts and concessions were necessary for the company to survive:

“The privately-held company filed for Chapter 11 protection in January, its second trip through bankruptcy court in less than a decade. The company cited increasing pension and medical costs for employees as one of the drivers behind its latest filing. Hostess had argued that workers must make concessions for it to exit bankruptcy and improve its financial position.”

Critics point, again, to union-related wage and pension costs as the reason yet another company tanks in the U.S. You might recall another one: General Motors. The principal reason for the failure of GM (and the subsequent bailout) was largely the wage, benefit and pension costs.

Except, unlike GM, Hostess won’t have Obama bail it out. Who’s responsible for the death of an American iconic company? Take our poll.

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